I may have an opportunity to purchase a local Gym and am wondering if some of you experienced Gym owners can give me some tips on what to look for prior to my purchase. Location, numbers, membership, hot equipment etc.
Any advice from those who are there, or have been there would be most appreciated.
Thanks very much,
Zeb
That’s really something! What a great opportunity: to have such a solid member of the T-Nation running his own gym!
I’m guessing you are nowhere near Western New York. Damn.
Good luck! That would be a great place to train, I’m sure.
Tim
I’ve been a fitness club owner for the past year and a half. My partner and I bought it when it was going out of buisness. It is the most gratifying risk I’ve ever taken.
My advice to you is to make sure you KNOW WHO YOUR MARKET IS!!! “gyms” usually don’t make money, “fitness clubs” usually is where the money is!
In other words my club takes in mostly families, beginners, and the like, however I also have a handfull of athletes and bodybuilders.
I base all my sales around the personal training. Each new member receives two free p.t. sessions to help them get started. It’s pointless to join a club only to look the same 30 days later!
My last and probably most valuable piece of advice would be to be patient and build up your membership dues. In other words, get as many members as you can to pay monthly dues instead of yearly paid-in-fulls. If you have most of your members paying monthly dues it makes going through the summer a piece of cake. Weather you have a great summer or a slower one, with conistant membership dues coming in you have guaranteed money coming in each month.
Sorry for the long reply, hope this helps. If you have any other questions feel free to PM me. Good luck!!!
Zeb, good luck with the gym. It is an awesome experience. I owned a gym for about 2 1/2 years prior to my current “vacation” in Iraq. A few questions for you: 1) How long has the gym been there? 2) What is it’s primary source of income now? (memberships, training, etc.) 3) What other gyms are in the area? (competition) I would be glad to help out with any advice I can.
Strength Through Sacrifice,
TMAZ
Jason852:
Thanks for your great advice!
This is currently a “lifting Gym,” However, I want to turn it into a “Fitness Club.” I was thinking of doing this by adding a swimming pool, hot tubs and a Sauna. I know it’s a major investment, but I think the market is underserved.
The only competition is the local YMCA, and they do not have a very good facility.
I was under the impression that selling a yearly membership up front is the best way to go. You are telling me that selling monthlys is better. I am a bit confused about that one, would you mind explaining this a bit more in detail?
Thanks again for your comments!
[quote]TMAZ wrote:
Zeb, good luck with the gym. It is an awesome experience. I owned a gym for about 2 1/2 years prior to my current “vacation” in Iraq. A few questions for you: 1) How long has the gym been there? 2) What is it’s primary source of income now? (memberships, training, etc.) 3) What other gyms are in the area? (competition) I would be glad to help out with any advice I can.
Strength Through Sacrifice,
TMAZ[/quote]
The Gym has been there for about five years. It’s primary source of income is it’s membership dues. As previously noted the only competition is a local YMCA.
Any advice is appreciated!
[quote]TShaw wrote:
That’s really something! What a great opportunity: to have such a solid member of the T-Nation running his own gym!
I’m guessing you are nowhere near Western New York. Damn.
Good luck! That would be a great place to train, I’m sure.
Tim[/quote]
TShaw:
Western NY? No, sorry. No where near it!
Thanks for asking.
ZEB
The Monthly payments work well because for some people being tied into a 12 month contract or paying a year upfront for membership will put them off joining.
This system has worked well for me so far at my gym.
It sounds like a big investment to change the concept of the gym.
Are you still going to try and retain the current members or are you looking for a totally new demographic?.
Things are different for me in the UK my place is Free weights only because over here there are too many “fitness clubs” and none that really cater to the serious lifter/athlete.
ZEB,
You do want to sell yearly memberships, however try to get the majority of the members to pay monthly based on a year contract. That way money is always coming in! Sorry I wasn’t clearer on this.
Also, if you are going to be a “fitness club” DO NOT have a swimming pool and a hot tub, etc. Unless you are investing in an athletic club (weights, tennis, backetball, etc.). Your overhead will be too high!!!
Fitness clubs dues are generally around $40 per month and cannot support the financial requirments of a swimming pool.
Athletic clubs can because their dues are higher. Generally above $70 per month. And they also charge extra for tennis court fees, etc.
Swimming pools look great while giving tours, however will cause more headache than their worth! Keep it simple: weights, cardio, aerobics, tanning, lockers, and day care! Day care will draw in the family memberships that you want.
Hope this helps. Good luck!!!
Day care? well I have to tell you I never thought of that. How big of an area do you need for the day care facility. Also, who would run it? I am sure you need someone who is experienced. This could be a liability problem. Do you have a day care facility?
ZEB,
Day care brings the moms, where moms go dads aren’t far behind.
As far as liability is concerned, don’t worry. Advertise it as “supervised playroom” it will take care of any liability issues. You only need about 400sq ft of space and just have run during your peak hours.
Members should be allowed to let their children (generally over 3yrs) play in the playroom during non supervised hours. Just make sure they sign their children in and out.
I guess we don’t call it daycare, instead we call it “supervised child area.”
It will help bring in more families, which in turn usually means a better class of PAYING members.
I work at a 24 hr Fatness kid-care place, and in my experience, it is a great way to get people to join. Some pointers are:
Have as few moving parts in your child area as possible,
Keep a television with plenty of Spongebob, but way out of reach,
Have the staff take a CPR class, and somehow try to do a background check on all babysitters.
In my state the rule is: there ought to be one attendant for every 10 children, but 24hr is rather lax in that policy.
And if you really care about the little snots, you can even go above and beyond by installing a small cubicle with a small swiss ball, maybe a couple pink 2.5 pounders, a bar for pullups, and some posters demostrating how to do push-ups and set an age limit of say, 8 and up so they could have a mini-gym while parents work out. In addition to that, a basketball hoop would be a nice attraction as well.
As far as paperwork, it is necessary to have some sort of child-care agreement form and sign-in sheet to make the establishment real formal.
There ya go, now go get em!
Heowww, Jason and the others:
Thanks very much for the help. You have given me some great ideas.
One more area I would like to cover is what the thing is worth. How do you value the current customer base. Seems he has three things that he is basing his sale price on: 1. Value of building. 2. Value of equipment. 3. Value of customer base.
Any ideas?
You probably already know this but you DEFINITELY want to form a corporation.
Although I have never run a gym, just based on my experience as a lawyer, I would think that having a pool, sauna, etc., would be a greater liability than a day care. Some idiot slips in falls in the pool area an he’ll look to sue you. Day care areas, if planned out correctly, can be fairly safe. Don’t be “lax” about following your state’s regs regarding the ratio of attendant’s to kids. If a kid should get hurt, failure to follow regs points to civil liability and exposes you to fines from the state.
Also, as to what Jason said about the monthly dues, I’d be curious to hear his or anyone’s thoughts on pre-payment discounts, e.g., if you pay three months in advance you get a 5% discount. This would help improve cash flow, and as any small business owner will tell you, lack of cash flow is the biggest problem that they face.
MikeTheBear:
Thanks for the suggestion. I plan on forming an “S” Corporation if I go through with this. What do you think?
I would also have a closed circut TV camara in the baby sitting area so Mom can look on if she wants. There will also be an attendant with the children
The gym I work out in always gives a discount and takes fees up to a year in advance. This is a great idea especially around new years. Most people come to gyms or fitness centers with the best intentions but only last a month or two. After that they just tell themselves they are going to start working out again for the rest of the year. This keeps your profit up without them using the showers or other facilities. It does take a little more work on the accounting side though. I would look into seting up the monthly bank drafts that can be just as good if not better. My neighbor has been paying 24Hour for a year and not gone once.
[quote]ZEB wrote:
Thanks for the suggestion. I plan on forming an “S” Corporation if I go through with this. What do you think?
[/quote]
Absolutely!
[quote]ZEB wrote:
I would also have a closed circut TV camara in the baby sitting area so Mom can look on if she wants. There will also be an attendant with the children[/quote]
Excellent idea.
Greetings. My name is Cleitus Van Redneck. I will be the manager of Zeb’s new gym.
Zeb is on the look out for any free posters of the commander-in-chief (particularly naked ones) to wallpaper his new facility.
If you can complete 20 consecutive chins while singing the star-spangled banner and cheering on our boys in Iraq on CNN, we will give you a free membership.
No Democrats please.
Zeb, looks like you are in good hands so far. Everyone is giving excellent advice, almost all of which I would have said too. I will try to address some things not brought up yet.
I’ve been in the business for a long time (11 years in my current facility so far). I like the advice others have given because it is realistic. Don’t go into this business with any illusions of it being easy and making tons of money. Not to say that you can’t do well, but I always tell people that they should only go into this business if they truly have passion for fitness. For those who are just interested in making money, go into the money business. It will be a lot easier to sell if you love it, because people will be motivated and inspired by your energy. Think of the people you have (or have not) purchased things from in the past. If they were excited about what they were selling it may have gotten you excited about buying it. If someone is just a dull order taker or an apathetic college student then you don’t feel as complelled to part with your money.
Seems he has three things that he is basing his sale price on: 1. Value of building. 2. Value of equipment. 3. Value of customer base.
Have you written a business plan yet? I would start one and start putting together the numbers on A) buying his place, or B) building your own.
His building may be in a great location, but you may have a location that works better for you or that may get better access to your members. Also, maybe purchasing the building is overkill. I don’t know how fast commercial property in your area sells, but if you don’t have a really good market, you may want to lease the property to give yourself some flexibility in case you want to move later down the road. What is your population base in that area, and who is your biggest market? Is is residential or is it business? My personal business is in the financial district, so I cater primarily to a business clientele. The needs are very similar to a residential in terms of building a base of members, but your busiest hours and your offerings may be a lot different. The good part about buying the building is that you will have something material for a bank to have as collateral. Memberships aren’t really a tangeable thing. They are important for YOU as accounts receivable, but banks don’t do loans based on that for the most part.
How old is the equipment? Usually that stuff depreciates over 4-7 years (cardio equipment depreciates much faster than weights obviously). It may still be useable, but in terms of actual value may not be worth anything. You may and probably will want to put in all brand new stuff and make sure you get what you want. You may also work the deal to where you don’t pay nearly as much for the equipment as he is asking for it if he thinks that you don’t really want it. He doesn’t want to take it with him to try to sell it seperately, I guarantee you! He just wants to unload that stuff and he will probably practically give it away with the facility if you follow through on the purchase. All that is assuming that it isn’t really current and fancy equipment.
Probably THE most important thing that you are really purchasing is the membership base. How many members does he have to start off with. Have you had a chance to look at the cash flow of the business? Would you be able to step right in and immediately be able to pay all the bills or is he still in a deficit situation. If he’s in a deficit (if his membership revenue is lower than the break-even point and you have to make up the difference with ancillary sales like personal training or proshop), then you may not want to buy the place because there might be a reason he has not been able to pull enough base sales to keep the place afloat. Maybe the location? Prices? Atmosphere? Staff problems? Who knows. Where this might benifit you if he is in a deficit is that he might be in a fire sale and willing to unload for pennies on the dollar. If his base is pretty solid then his price is probably based on a year’s revenues, which isn’t bad if all the other factors we talked about line up the way you want them to.
Back to an earlier point though. If you love this business and you aren’t comforatable with his set-up, what’s stopping you from doing it on your own? If you pursue it like that it will put more power in your hands in the negotiation process (if he wants out he sure as hell doesn’t want you as competition, nor does he want to have to try to sell it if there is competition in the area because he will have an even harder time finding a buyer). Look at commercial property all over the place (buy or lease), price out equipment (I can email you the numbers to a ton of distributors I have used in the past that I trust), and do a little market study in your area to see just how big of an opening there really is for your fitness center.
However it goes, good luck with it. I will continue to add to this thread as ideas hit me. If you need any other assistance feel free to PM me and I will give you my personal contact info.
[quote]ZEB wrote:
MikeTheBear:
Thanks for the suggestion. I plan on forming an “S” Corporation if I go through with this. What do you think?
I would also have a closed circut TV camara in the baby sitting area so Mom can look on if she wants. There will also be an attendant with the children[/quote]
Zeb:
I’m not Mike, but I think an S-corp is a good solution provided you pay close attention to the requirements – if you blow one, an S-corp will automatically convert into a C-corp as far as the IRS is concerned, which could have adverse tax consequences (depending on whether your corporation turns a profit of course - and, if you make yourself an employee your salary is a deductible expense - but, if you want to dividend profits to yourself keeping the S-corp status would obviously be important). You may wish to consider an LLC, depending on your goals and future expansion plans.
Are you investing solo, or would you be investing with someone else or a group?
Also, w/r/t getting your money upfront or as a steady revenue stream, it probably depends on whether you will have to borrow to effect the renovations you were discussing. If you qualify for a good rate, you might prefer that steady stream, but if you’re paying a lot of interest you obviously want to pay it down ASAP.
Feel free to PM me – I deal with start-up corporations all the time, although the ones I deal with are generally looking to get Angel and/or Venture Capital financing in the future, with an eye on going public or being bought out, as opposed to be true small businesses.